Pakistan and Turkey undoubtedly have a strategically important and economically lucrative relationship. While Turkey could become a bridge between Asia and Europe, Pakistan shares borders with two large, densely populated economies and could become a gateway to energy-rich Central Asia. However, given their trade structures and volumes, Pakistan needs Turkey more than the other way around.
Pakistan’s trade expansion with Turkey promises substantial gains. Direct gains are an expected outcome, given the trade surplus and Turkey’s large, as yet untapped market. There are also strong indirect gains, given the opportunity for greater firm synergies, enabling long-term structural improvements that are imperative for sustained economic growth in Pakistan
The most important aspect of this relationship is the strong political will needed to facilitate the strengthening of economic and trade relations between the two states. As export market shares, India and Turkey are approximately equally important, but the key factor that tilts the scales in favor of Turkey is the greater certainty and stability that characterizes its relations with Pakistan. Turkey has emerged as one of Pakistan’s most important trading partners over the last decade with the volume of trade increasing from almost US$ 0.27 billion during 2003 to near US$1 billion during 2011. This impressive rise in trade volume accounts for the proposed PTA with both states agreeing to strengthen trade relations by enlarging the trade volume to almost US$ 2 billion. However, a cause for concern has been the sharp dip in the volume of trade to almost US$ 0.69 billion during 2012.
Presently, Turkey has linked finalization of a Free Trade Agreement (FTA) with market access for Turkish automobile sector in Pakistan. Both states have already missed the deadline of February 2017 to finalize the FTA.
Turkey has linked giving market access to Pakistani textile and clothing sectors with automobile sector’s liberalization. Pakistan’s exports to Turkey fell by approximately 19 percent yearly after the imposition of extra duties by Ankara during 2011.
Pakistan’s exports to Turkey during 2014 were $391 million; this includes top exports of Cotton of $185 million. Pakistan’s exports to Turkey peaked during 2011, standing over $755 million, but started falling from 2012, when they declined sharply by 44 percent to $416 million.
Exports dipped to $311 million during 2015 from $873 million during 2011. Pakistan also imposed regulatory duties on imports from all states counting Turkey.
Experts said, if extra tariffs are included, trade weighted tariff imposed by Turkey on imports from Pakistan increased from 7.2 percent to 18 percent, while tariff imposed by Pakistan on Turkish goods increased to 15.8 percent from 13.5 percent.
An analysis revealed that Turkey imposed extra duty on 1,880 products. As a result of these measures, Pakistan’s 205 exportable products are facing extra duties. This constitutes 40 percent of Pakistan exports to Turkey comprising of textiles, garments and leather.
Contrary to this, Turkey exports of 216 products face regulatory duties, which constitute 17 percent of Turkish imports into Pakistan. The additional duties were imposed on 207 tariff lines of Pakistan.